Grimshaw rules out ‘fifth-pillar’ swoop

Bank of Queensland
chief executive Stuart Grimshaw has dismissed market speculation that the company could merge with other regional lenders to form a “fifth pillar" to take on the big four banks.

Mr Grimshaw told the The Australian Financial Review that as well as commercial considerations, a big barrier to any consolidation would be likely government resistance to such a move.

“Merger and acquisition activity I don’t think is going to be on the scene for the government," he said.

“A lessening of competition, even though it might be a fifth pillar, wouldn’t be politically acceptable."

Mr Grimshaw said the government would oppose a merger between Queensland-based BoQ and
Suncorp Group
, because potential synergies and cost savings would lead to job losses.

The Australian Competition and Consumer Commission analyses proposed state mergers and market sources believe a merger of the Queensland groups would struggle to be approved because of a potential lessening of competition in the state.

There has been ongoing market speculation that Suncorp, Bank of Queensland and possibly
Bendigo and Adelaide Bank
could be involved in a merger to take on the big four banks, which control more than 80 per cent of the mortgage market.

In 2007, BoQ launched a hostile $2.4 billion takeover offer for Bendigo Bank at a 36 per cent premium to the prevailing share price.

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Bendigo and Adelaide Bank chief executive Mike Hirst last week downplayed the prospect of his business being involved in another tie-up.

He said a merger between the other two Queensland banks might make some sense.

“On the one hand there’s good opportunity for rationalisation of costs in the Queensland cost base," Mr Hirst said.

“But we’ve all got very different value propositions and at the moment we’re all capable of making a go of it on our own and providing reasonable returns to shareholders."

Mr Grimshaw said a merger wouldn’t necessarily give a group of regional banks the scale to fully compete against the big four.

“Each of them have their own culture as well," he said.

“Culture is the most important thing in any acquisition and I think they’re all completely different."

The number of regional banks has fallen over the past four years.

Westpac took over St George Bank and Commonwealth Bank of Australia acquired BankWest in 2008. ANZ was also close to making a formal bid in 2008 for Suncorp, which was saved by the introduction of the government guarantee on wholesale funding and deposits.

Some competition advocates have criticised the ACCC for allowing the takeovers, which were partly waved through due to concerns over smaller lenders’ capacity to survive the financial crisis.

Outside of the unlikely event of a foreign bank entering the playing field, any takeover move would have to be launched by Suncorp (market capitalisation $10 billion) or Bendigo and Adelaide Bank ($2.9 billion), because Bank of Queensland ($2 billion) is the smallest bank by market capitalisation.